Standard Pesticidies Pvt.Ltd., Baroda V. The Addl.CIT.,TDS Range, Baroda

ITA 1946/AHD/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9212 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-12-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 19-11-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 04-06-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHAILAJA RAI
• Keywords: Reasonable cause; TDS
• Section: 133A; 207; 192; 27

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE S/SHRI MAHAVIR SINGH, JM AND D.C.AGRAWAL, AM STANDARD PESTICIDES (P) LTD., 47/6, GIDC ESTATE, NANDESARI, DIST. BARODA. VS. ADDL. CIT, TDS RANGE, BARODA. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI SAKAR SHARMA, AR RESPONDENT BY:- SMT. SHAILAJA RAI, DR O R D E R PER D.C. AGRAWAL, ACCOUNTANT MEMBER . THESE ARE TWO APPEALS FILED BY THE ASSESSEE AGAINS T THE ORDERS OF LD. CIT(A) DATED 2.2.2010 FOR ASST. YEARS 2003-04 & 200 4-05 WHEREIN THE LD. CIT(A) HAS CONFIRMED THE LEVY OF PENALTY UNDER SECTION 271C FOR NON- DEDUCTION OF TAX ON REMUNERATION PAID BY THE COMPAN Y TO THE DIRECTORS. IN ASST. YEAR 2003-04 THE AO HAD LEVIED PENALTY OF RS.5,12,400/-. THE LD. CIT(A) CONFIRMED THE SAME WHEREAS IN ASST. YEA R 2004-05 AO LEVIED PENALTY OF RS.4,07,556/- WHICH IS ALSO CONFIRMED BY THE LD. CIT(A). 2. AT THE OUTSET THE LD. COUNSEL FOR THE ASSESSEE H AD SOUGHT ADJOURNMENT. HOWEVER, HE LATER AGREED TO PURSUE THE APPEALS AND NOT TO PRESS FOR THE ADJOURNMENT. ACCORDINGLY, THE APPEALS ARE HEARD AND DISPOSED OF AS UNDER. ITA NOS.1946 & 1947/AHD/2010 ASST. YEARS :2003-04 & 2004-05 ITA NOS.1946 & 1947/AHD/2010 ASST. YEARS 2003-04 & 2004-05 2 THE FACTS OF THE CASE ARE THAT A SURVEY UNDER SECTI ON 133A WAS CARRIED OUT BY THE DEPARTMENT ON 2.9.2004. IT WAS NOTED BY THE SURVEY OFFICERS THAT ASSESSEE HAS NOT DEDUCTED THE TAX ON REMUNERATION P AID TO THE DIRECTORS AS UNDER :- ASST. YEAR 2003-04 SL.NO. NAME OF THE DIRECTORS AMOUNT PAID (RS.) TAX (RS.) 1. SHRI RAMESHCHANDRA M. SHAH 12,00,000 3,50,000 2. SHRI MANHARLAL M. SHAH 6,00,000 1,61,700 ASST. YEAR 2004-05 SL.NO. NAME OF THE DIRECTORS AMOUNT PAID (RS.) TAX (RS.) 1. SHRI RAMESHCHANDRA M. SHAH 12,00,000 3,67,400 2. SHRI MANHARLAL M. SHAH 2,17,516 40,156 THE AO ACCORDINGLY INITIATED PENALTY PROCEEDINGS UN DER SECTION 271C. IT WAS EXPLAINED TO THE AO THAT THE TWO DIRECTORS HAD GIVEN A DECLARATION TO THE COMPANY TO THE EFFECT THAT THEY WILL PAY THE AD VANCE-TAX AND, THEREFORE, TDS SHOULD NOT BE MADE FROM THE PAYMENTS OF REMUNERATION TO THEM. THE ADVANCE TAX WAS PAID ACCORDINGLY. SINCE T HERE WAS NO LOSS OF REVENUE PENALTY UNDER SECTION 271C CANNOT BE LEVIED ON THEM. THE ASSESSEE ALSO RELIED ON THE JUDGMENT OF THE TRIBUNA L IN THE CASE OF WIPRO GE MEDICAL SYSTEMS LTD. (2005) 3 SOT 627(BANG) AND THE DECISION OF THE HON. DELHI HIGH COURT IN THE CASE OF AZADI BACH AO ANDOLAN VS. UNION OF INDIA 160 TAXMAN 249. THE AO FURTHER GAVE OPPORTUNITY TO THE ASSESSEE VIDE HIS LETTER DATED 7.12.2004 BUT THIS O PPORTUNITY WAS NOT AVAILED. THE INITIAL EXPLANATION SUBMITTED TO THE A O WAS AS UNDER :- THE DIRECTORS HAD MADE DECLARATION TO THE COMPANY THAT THEY WILL PAY THE ADVANCE TAX AND ALSO WILL MAKE THE INVESTMENT A ND HENCE COMPANY SHOULD NOT DEDUCT TAX FROM THE PAYMENT OF DIRECTOR S REMUNERATION. THE DIRECTORS HAVE PAID THE ADVANCE-TAX AND ALSO HA VE FILED I.TAX RETURNS FOR BOTH THE YEARS, UNDER REVIEW. THE DETAI LS AND SUPPORTING DOCUMENTS ARE ATTACHED HEREWITH. IN VIEW OF THIS, T HERE IS NO LOSS TO THE REVENUE. ITA NOS.1946 & 1947/AHD/2010 ASST. YEARS 2003-04 & 2004-05 3 THE COMPANY HAS STARTED DEDUCTING TAX AT SOURCE FRO M DIRECTORS REMUNERATION FROM 1.4.2004. THE AO DID NOT ACCEPT THE ABOVE EXPLANATION ON THE GROUND THAT IF ABOVE EXPLANATION IS ACCEPTED THEN THERE WILL NOT BE ANY MEANING OF TDS PROVISIONS UNDER SECTION 192B OF THE ACT. HE THEREA FTER LEVIED THE PENALTY UNDER SECTION 271C AS ABOVE. 3. BEFORE LD. CIT(A) IT WAS SUBMITTED THAT DIRECTOR S HAD PAID ADVANCE TAX ON THE REMUNERATION SO RECEIVED AS UNDER :- ASST. YEAR 2003-04: DATE OF PAYMENT DIRECTOR/REMUNERATION TAX PAYABLE TAX PAID TAX PAID 30.4.2003 1,00,000 29,951 31.5.2003 1,00,000 29,951 30.6.2003 1,00,000 29,951 31.7.2003 1,00,000 29,951 31.8.2003 1,00,000 29,951 30.9.2003 1,00,000 29,951 31.10.2003 1,00,000 29,951 30.11.2003 1,00,000 29,951 20.12.2003 1,00,000 29,951 2,00,000 15.12.2003 31.1.2004 1,00,000 29,951 28.2.2004 1,00,000 29,951 31.3.2004 1,00,000 29,951 2,10,000 15.3.2004 ASST. YEAR 2004-05 DATE OF PAYMENT DIRECTOR/REMUNERATION TAX PAYABLE TAX PAID TAX PAID 30.4.2003 1,00,000 29,951 31.5.2003 1,00,000 29,951 30.6.2003 1,00,000 29,951 31.7.2003 1,00,000 29,951 31.8.2003 1,00,000 29,951 30.9.2003 1,00,000 29,951 ITA NOS.1946 & 1947/AHD/2010 ASST. YEARS 2003-04 & 2004-05 4 31.10.2003 1,00,000 29,951 30.11.2003 1,00,000 29,951 20.12.2003 1,00,000 29,951 2,00,000 15.12.2003 31.1.2004 1,00,000 29,951 28.2.2004 1,00,000 29,951 31.3.2004 1,00,000 29,951 2,10,000 15.3.2004 TOTAL 12,00,000 2,54,612 4,10,000 THEREFORE, IF TAXES ARE PAID AS ADVANCE TAX THEN CO MPANY SHOULD NOT BE HELD LIABLE FOR NOT DEDUCTING TAX AT SOURCE. THE LD . CIT(A), HOWEVER, DID NOT AGREE. ACCORDING TO HIM THE LETTERS SUBMITTED B Y THE DIRECTORS WERE ONLY OF INTENTION TO PAY THE TAX AND IT WAS NOT A C ONFIRMATION OF HAVING PAID TAX. SECONDLY, IF LETTERS ISSUED BY THE PAYEE FOR NOT DEDUCTING THE TAX IS ACCEPTED AS A REASONABLE CAUSE THEN PROVISIONS O F CHAPTER XVII-B WOULD BECOME REDUNDANT. THE LD. CIT(A) IN THIS REGA RD HELD AS UNDER:- IT HAS BEEN HELD IN THE ABOVE REFERRED TRIBUNAL DE CISION THAT LEVY OF PENALTY UNDER SECTION 271C FOR FAILURE TO DEDUCT TA X AT SOURCE IS NOT AUTOMATIC AND ABSENCE OF REASONABLE CAUSE HAS TO BE ESTABLISHED BEFORE LEVY OF SUCH PENALTY. IT IS THEREFORE TO BE SEEN TH AT WHETHER NON TDS ON THE BASIS OF CHAPT.XVII-B COPY OF THE LETTERS OF D IRECTORS CAN BE CONSIDERED AS A REASONABLE CAUSE. CHAPT.XVII-B OF T HE ACT DOES NOT GIVE THIS OPTION TO THE PAYER. A LIABILITY HAS BEEN CAST ON THE PAYER OF THE AMOUNT TO DEDUCT THE TAX AS PRESCRIBED. IF HE DOES NOT DEDUCT THE AMOUNT OF TAX THE PENALTY IS IMPOSED UNLESS HE SHOWS REASO NABLE CAUSE FOR NON- DEDUCTION. A LETTER FROM THE RECIPIENT THAT THE PAY ER MAY NOT DEDUCT THE TAX BECAUSE THE RECIPIENT INTENDS TO PAY THE TAX ON THE INCOME IN FUTURE CANNOT BE CONSIDERED AS A REASONABLE CAUSE. IT MUST BE NOTED THAT IT IS NOT A CASE WHERE THE RECIPIENT HAS PAID THE TAX AND THE N HAS APPROACHED THE PAYER OF THE AMOUNT. THE RECIPIENT HAS MERELY SHOWN HIS INTENTION AND FILED A LETTER STATING THAT HE WILL PAY THE TAX IN FUTURE ON THE AMOUNT ALREADY RECEIVED AND DUE FOR DEDUCTION. IN THE PRES ENT CASE, THE RECIPIENT HAS PAID THE TAX SUBSEQUENTLY BUT IT DOES NOT ALTER THE SITUATION THAT THE PAYER HAD NOT FULFILLED THE RESPONSIBILITY CAST UPO N BY THE ACT AT THE TIME OF PAYMENT, LET US CONSIDER A HYPOTHETICAL SITUATIO N WHERE THE RECIPIENT MIGHT NOT HAVE PAID THE TAX IN FUTURE AFTER FILING SUCH A LETTER. CAN WE SAY THAT IN THAT SITUATION PROVISIONS OF SEC.271C WOULD APPLY? THE ANSWER WOULD BE YES BECAUSE MERELY FILING A LETTER FROM TH E RECIPIENT WOULD NOT ITA NOS.1946 & 1947/AHD/2010 ASST. YEARS 2003-04 & 2004-05 5 BE ENOUGH FOR IGNORING THE PROVISIONS OF CHAPT.XVII -B. IN THAT CASE, THE WHOLE PROVISIONS OF CHAPT.XVII-B WOULD BECOME REDUN DANT. THE THRUST OF ARGUMENT IS THAT SINCE ULTIMATELY THE RECEIPIENT HA S MADE THE PAYMENT OF TAX AND THERE IS NO REVENUE LOSS, THEREFORE, THE PE NALTY CANNOT BE LEVIED. HOWEVER, THE PROVISION OF CHAPT. XVII-B AND 271C DO NOT OPERATE ON THE PREMISES THAT UNLESS IT IS ESTABLISHED THAT THERE I S LOSS OF REVENUE, PENALTY UNDER SECTION 271C CANNOT BE LEVIED. IF THE PROVISI ONS OF SEC.271C IS INTERPRETED ON THESE LINES, THEN, THE PROVISIONS RE GARDING DEDUCTION OF TAX WILL AMOUNT TO REDRAFTING BECAUSE SUCH LINE OF REAS ONING WOULD GIVE THE PAYER AN OPTION WHETHER TO DEDUCT TAX OR NOT AS PER HIS UNDERSTANDING WHETHER THERE IS GOING TO BE REVENUE LOSS OR NOT. T HIS WILL LEAD TO A CHAOTIC SITUATION NOT INTENDED BY THE LEGISLATURE. IT HAS BEEN HELD BY COURTS THAT THERE IS NO EQUITY IN TAX LAWS. THERE I S NO DENYING THAT THE APPELLANT HAD NOT DISCHARGED THE RESPONSIBILITY CAS T UPON IT FOR DEDUCTION OF TAX MERELY ON THE BASIS OF A LETTER BY RECIPIENT . THAT ULTIMATELY DUE TAX WAS PAID BY THE RECIPIENT WOULD NOT ALTER THE FACT THAT THERE HAS BEEN DEFAULT IN COMPLIANCE NOR IT WOULD MITIGATE THE OFF ENCES. IT SHOULD ALSO BE SEEN THAT THE LIABILITY AROSE ON EACH PAYMENT WHICH REMAINED DUE FOR MONTHS TILL THE ADVANCE TAX WAS PAID IN DECEMBER AN D MARCH. TO THAT EXTENT THE GOVERNMENT WAS DEPRIVED OF ITS DUE. INTE REST CHARGED, IF ANY, ON DELAYED PAYMENT ONLY PARTLY COMPENSATES THE MONE TARY LOSS. IT DOES NOT TAKE CARE OF DEFIANCE/VIOLATION OF LAW WITHOUT REASONABLE CAUSE. IN THE INSTANT CASE, THE LETTER GIVEN BY THE DIRECTOR CANNOT BE CONSIDERED AS REASONABLE CAUSE. CONSIDERING THE ABOVE FACTS, I HO LD THAT THE PENALTY HAS BEEN CORRECTLY LEVIED IN THIS CASE. HE ACCORDINGLY CONFIRMED THE LEVY OF PENALTY. 4. BEFORE US, THE LD. AR FOR THE ASSESSEE PRIMARILY RAISED THE SAME ARGUMENTS AS HE HAD TAKEN BEFORE THE LD. CIT(A). IN BRIEF THEY ARE - (1) IT IS ONLY A TECHNICAL OR VENIAL BREACH OF THE PROV ISIONS AND ASSESSEE WAS UNDER BONA FIDE BELIEF THAT ON THE STR ENGTH OF LETTERS RECEIVED FROM THE DIRECTORS, COMPANY IS NOT LIABLE TO DEDUCT THE TAX. (2) ONCE TAX DEMAND IS PAID BY THE RECIPIENTS THEN THER E IS NO REASON TO LEVY THE PENALTY UNDER SECTION 271C AS TH ERE IS NO LOSS OF REVENUE ITA NOS.1946 & 1947/AHD/2010 ASST. YEARS 2003-04 & 2004-05 6 (3) PENALTY CAN BE IMPOSED ONLY FOR DELIBERATE DEFIANCE OF LAW OR WHERE ASSESSEE IS GUILTY OF CONTUMACIOUS CONDUCT. (4) ASSESSEE HAS A REASONABLE CAUSE IN THE SENSE THAT A SSESSEE HAS RECEIVED LETTERS FROM THE DIRECTORS THAT THEY WILL PAY THE ADVANCE-TAX. (5) ADVANCE TAXES HAVE BEEN PAID BY THE DIRECTORS ON DU E DATE. THEY HAVE MADE THE COMPLIANCE AND, THEREFORE, NO PE NALTY SHOULD BE LEVIED. 5. THE LD. AR REFERRED TO SEVERAL JUDGMENTS AS UNDE R :- HINDUSTAN STEEL LTD. VS. STATE OF ORISSA (1972) 83 ITR 26 (SC) WIPRO GE MEDICAL SYSTEMS LTD. VS. ITO (2005) 3 SOT 627 (BANG) WIPRO FINANCE LTD. VS. ITO (2003) 81 TTJ (BANG) 88 7 6. ON THE OTHER HAND, THE LD. DR SUPPORTED THE ORDE RS OF LD. CIT(A) AND SUBMITTED THAT IF ON THE BASIS OF LETTER RECEIV ED FROM THE PAYEES IF TDS IS NOT DEDUCTED AND THERE IS NO CONTROLLING MEC HANISM WHETHER THE RECIPIENTS OF REMUNERATION ARE PAYING TAXES THEN PR OVISIONS RELATING TO DEDUCTING TAX WOULD BECOME REDUNDANT. IF THE STATUT E HAS PROVIDED THAT TAX HAS TO BE DEDUCTED ON REMUNERATION PAID THEN TH E PAYER HAS TO DEDUCT THE TAX AND IT CANNOT BE SUBSTITUTED BY PAYEE MAKIN G PAYMENT OF ADVANCE TAX. A REASONABLE EXPLANATION IS THE ONE, ACCORDING TO THE LD. DR, WHERE ASSESSEE HAS ALL THE INTENTION TO COMPLY WITH THE L AW BUT BECAUSE OF CIRCUMSTANCES BEYOND HIS CONTROL, HE COULD NOT DO S O. FURTHER THE DIRECTORS AND THE COMPANY ARE CLOSELY CONNECTED, TH EREFORE, AND THERE IS NO CONFUSION AS TO THE LIABILITY TO DEDUCT THE TAX. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW THERE IS NO CASE FOR INTERFERENCE IN THE ORDERS PASSED BY THE LD. CIT(A). THE REASONS ARE TH AT ON THE STRENGTH OF LETTERS GIVEN BY THE PAYEES, THE PAYER CANNOT BE AB SOLVED FROM THE LIABILITY TO DEDUCT THE TAX. IF THIS IS ALLOWED TO BECOME THE PRECEDENCE ITA NOS.1946 & 1947/AHD/2010 ASST. YEARS 2003-04 & 2004-05 7 THEN WHENEVER PAYER IS REQUIRED TO DEDUCT THE TAX U NDER THE PROVISIONS OF CHAPTER XVII-B, THEN THE PAYER WOULD EASILY GET ABS OLVED FROM HIS STATUTORY RESPONSIBILITY AND THE PROVISIONS RELATIN G TO TDS WOULD BECOME OTIOSE AND TAX WILL ONLY BE REALIZED THROUGH ADVANC E-TAX. IF THIS WOULD HAVE BEEN THE INTENTION OF THE LEGISLATURE THAT TAX CAN BE COLLECTED BY WAY OF ADVANCE TAX ONLY THEN THEY WOULD HAVE NOT IN SERTED THE PROVISIONS RELATING TO DEDUCTION OF TAX AT SOURCE ON CERTAIN P AYMENTS MADE BY THE PAYER SUCH AS IN THE REMUNERATION IN THE PRESENT CA SE. THE LIABILITY OF THE COMPANY TO DEDUCT TAX FROM THE PAYMENT MADE TO THE DIRECTORS IS NOT DISPUTED BUT RECOURSE IS TAKEN TO REASONABILITY OF THE EXPLANATION WHICH IN OUR VIEW IS NOT. THE STATUTE PROVIDES THREE METHODS OF COLLECTION OF TAXES DURING THE FINANCIAL YEAR. ONE IS THE ADVANCE-TAX W HICH IS PROVIDED UNDER SECTIONS 207 TO 211. THE SECOND IS COLLECTION OF TAXES AT SOURCE WHICH IS PROVIDED UNDER SECTIONS 206 TO 206CA AND T HE THIRD IS DEDUCTION OF TAX AT SOURCE WHICH IS PROVIDED U/S 192 TO 206. IN SEQUENCE UNDER CHAPTER XVII-B IT IS FIRST THE DEDUCTION OF TAX AT SOURCE, SECOND IT IS COLLECTION OF TAX AT SOURCE AND THE THIRD IS THE AD VANCE-TAX. SECTION 209(1)(D) REALLY PROVIDES THAT ADVANCE-TAX WOULD BE PAID OUT OF TAX PAYABLE IN THE FINANCIAL YEAR AFTER REDUCING THEREF ROM TAX DEDUCTIBLE AND THE TAX COLLECTIBLE AT SOURCE DURING FINANCIAL YEAR UNDER ANY PROVISIONS OF THE ACT. FOR THE SAKE OF CONVENIENCE WE REPRODUC E SECTION 209(1)(D) AS UNDER:- SEC.209[(1) THE AMOUNT OF ADVANCE TAX PAYABLE BY A N ASSESSEE IN THE FINANCIAL YEAR SHALL SUBJECT TO THE PROVISIONS OF S UB-SECTION (2) AND (3) BE COMPUTED AS FOLLOWS NAMELY - (A) (B).. (C). ITA NOS.1946 & 1947/AHD/2010 ASST. YEARS 2003-04 & 2004-05 8 (D) THE INCOME-TAX CALCULATED UNDER CLAUSE (A) OR C LAUSE (B) OR CLAUSE(C) SHALL, IN EACH CASE, BE REDUCED BY THE AM OUNT OF INCOME- TAX WHICH WOULD BE DEDUCTIBLE[OR COLLECTIBLE] AT SO URCE DURING THE SAID FINANCIAL YEAR UNDER ANY PROVISION OF THIS ACT FROM ANY INCOME (AS COMPUTED BEFORE ALLOWING ANY DEDUCTIONS ADMISSI BLE UNDER THIS ACT) WHICH HAS BEEN TAKEN INTO ACCOUNT IN COMPUTING THE CURRENT INCOME OR, AS THE CASE MAY BE, THE TOTAL INCOME AFO RESAID; AND THE AMOUNT OF INCOME-TAX AS SO REDUCED SHALL BE THE ADV ANCE TAX PAYABLE.] THE WORDS USED IN THIS PROVISION IS DEDUCTIBLE OR C OLLECTIBLE, IT DOES NOT USE THE WORD DEDUCTED OR COLLECTED. IN OTHER WORDS THE TAX DEDUCTIBLE AT SOURCE OR COLLECTIBLE AT SOURCE CAN BE REDUCED BY T HE ASSESSEE FROM THE TAX LIABILITY PAYABLE DURING F.Y. THUS IF TAX IS NOT DE DUCTED OR NOT COLLECTED BY THE PAYER THEN STILL ASSESSEE HAS A RIGHT TO CLA IM THE DEDUCTION OF THE TDS DEDUCTIBLE OR COLLECTIBLE. THEREFORE EVEN WHERE TAX IS NOT DEDUCTED AT SOURCE THE PAYEE CAN STILL, SINCE GET AWAY FROM PAYING THE SAME AS ADVANCE TAX AS THERE IS NO LIABILITY TO PAY THAT TA X AS ADVANCE TAX, WHICH IS DEDUCTIBLE OR COLLECTIBLE AT SOURCE. ONCE THE MECHA NISM IS PROVIDED IN THE STATUTE THEN SUCH MECHANISM CANNOT BE BROUGHT TO NA UGHT BY FILING A LETTER BY THE PAYEE THAT HE WILL PAY ADVANCE TAX AND, THER EFORE, NO TDS HAS TO BE MADE ON THE PAYMENT. IN OUR CONSIDERED VIEW THIS PROPOSITION THAT TDS NEED NOT BE MADE ON THE STRENGTH OF A LETTER WO ULD LEAD TO SUBSTANTIAL CHAOTIC CONDITION INASMUCH AS SALARIED EMPLOYEES WI LL SUBMIT LETTERS FOR NOT DEDUCTING TAX TO THEIR EMPLOYER PRACTICALLY DIR ECTING THEM NOT TO DO SO ON THE PRETEXT THAT THEY WILL PAY IT AS ADVANCE TAX . THERE IS NO STATUTORY MECHANISM PROVIDED IN THE HANDS OF THE PAYER TO FIN D OUT WHETHER PAYEE WILL FULFILL THE PROMISE OR NOT. WHERE THE PAYEE DO ES NOT FULFILL THE PROMISE THERE IS NO MECHANISM WITH THE EMPLOYER OR PAYER TO PUNISH SUCH DEFAULTING PAYEES. IN THIS REGARD A FURTHER QUESTIO N WOULD COME WHETHER LIABILITY OF THE PAYER IS MITIGATED IN A CASE WHERE PAYEE MAKES GOOD THE ITA NOS.1946 & 1947/AHD/2010 ASST. YEARS 2003-04 & 2004-05 9 PAYMENT OF TAX AND DOES NOT MITIGATE WHERE PAYEE DO ES NOT MAKE THE PAYMENT OF TAXES AS APPARENTLY ASSURED BY HIM IN TH E LETTER GIVEN TO THE EMPLOYER. IN OUR CONSIDERED VIEW THE DEFAULT OF THE PAYER IS COMPLETE WHEN HE MAKES THE PAYMENT TO THE PAYEE WITHOUT DEDU CTING THE TAX AND WITHOUT THERE BEING A REASONABLE CAUSE. SUBSEQUENT CONDUCT OF THE PAYEE, WHETHER HE MAKES GOOD OF THE PAYMENT OR DOES NOT MA KE GOOD OF THE PAYMENT OF TAXES IS INCONSEQUENTIAL. PENALTY U/S 27 1C IS FOR THE DEFAULT COMMITTED BY THE PAYER AND THE SATISFACTORY NATURE OF EXPLANATION HAS TO BE SEEN ONLY WITH RESPECT TO THE CONDUCT OF THE PAY ER HIMSELF. THE CONDUCT OF THE PAYEE IS, THEREFORE, IMMATERIAL IN R EDUCING OR ENHANCING THE EXTENT OF DEFAULT OF THE PAYER WHO CANNOT HAVE ANY CONTROL OVER THE CONDUCT OF THE PAYEE IN MAKING GOOD OF THE PAYMENT OF TAXES OR OTHERWISE. 8. EVEN THOUGH IT IS NOT DISPUTED THAT LEVY OF PENA LTY IS NOT AUTOMATIC BUT WHERE A CAUSE IS SHOWN WHICH RESULTS IN MAKING THE ENTIRE PROVISIONS OF DEDUCTION OF TAX REDUNDANT, AND WOULD CREATE A P RECEDENCE FOR ENABLING THE PAYERS NOT TO DEDUCT TAXES CANNOT BE S AID TO BE SATISFACTORY. AN EXPLANATION FOR DEFAULT IS HIGHLY INDIVIDUALISTI C SHOULD CONFINE TO THE FACTS AND CIRCUMSTANCES OF THAT CASE AND SHOULD BE SEEN AS SATISFACTORY ONLY IN THE FACTUAL MATRIX OF THAT CASE. IT IS AN E XPLANATION IN PERSONEM NOT AN EXPLANATION IN REM. ANY EXPLANATION IN REM L IKE IN THE PRESENT CASE AND WHICH HAS VERY WIDE REPERCUSSION AGAINST STATUT ORY SCHEME CANNOT BE ACCEPTED AS SATISFACTORY. 9. THE JUDGMENTS RELIED UPON BY THE LD. AR ARE REND ERED ON THE FACTS OF THOSE CASES AND EXPLANATIONS IN THEM ARE ACCEPTE D AS SATISFACTORY UNDER THE PECULIAR CIRCUMSTANCES OF THOSE CASES. THEY ARE EXPLANATION IN PERSONEM AND THEREFORE, THERE CANNOT BE ANY QUARREL WITH THE DECISIONS ITA NOS.1946 & 1947/AHD/2010 ASST. YEARS 2003-04 & 2004-05 10 GIVEN IN THOSE CASES. BUT THE FACTUAL MATRIX IN THE PRESENT CASE IS DIFFERENT AND WE STRONGLY FEEL THAT SUCH EXPLANATION WILL BE COUNTERPRODUCTIVE TO STATUTORY FRAME WORK AND HENCE IS NOT ACCEPTABLE. A S A RESULT, WE DISMISS THE APPEALS FILED BY THE ASSESSEE, 10. IN THE RESULT, THE APPEALS FILED BY THE ASSESSE E ARE DISMISSED. ORDER WAS PRONOUNCED IN OPEN COURT ON 10.12.10. SD/- SD/- (MAHAVIR SINGH) (D.C. AGRAWAL) JUDICIAL MEMBER ACCOUNTANT ME MBER AHMEDABAD, DATED : 10.12.10. MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD 1.DATE OF DICTATION 29/11/2010. 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 1/12/2010 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..